Feb

10

Welcome to New England. This weekend, there was another protest. Approximately 400 people protested a new $800 million combined cycle gas turbine to be built in Salem. Approximately 50 protested in favor of replacing the old coal plant with natural gas. This spectacle after similar protests took place at Seabrook and Pilgrim, Boston area's two nuclear units.

If you add it up, New Englanders want no coal. No natural gas. No nukes. No new transmission lines.

At the same time, New England conducted their annual auction for [power plant] capacity. IIRC, the auction came up short by about 350 megawatts, including Canadian sources.

New Englanders are getting what they want. Major coal plants are exiting. Nuclear plants are retiring decades early. Few people are willing to invest in new natural gas based power plants. No new transmission lines of consequence are being built.

In addition, since no new natural gas pipelines are being built, there is a chronic shortage of natural gas. Boston has to import marginal natural gas from Africa through LNG channels. The practical solution is to burn oil.

Energy costs are becoming a major element in household budgets. I believe New England's energy costs are affecting real estate values. It would be interesting to see any credible studies.

Rocky Humbert writes:

Carder writes: "I believe New England's energy costs are affecting real estate values. It would be interesting to see any credible studies." Energy costs for people whose income is over $50k have already grown from 5% of after tax income to 9% of after tax income from 2001 to 2012. This is a national statistic (www.americaspower.org).

That the NYC Tri State area has both among the highest energy costs and most expensive real estate challenges Carder's theory. My guess is that this is a long cycle phenomenon and not well suited to short-term studies. The change in real estate prices are primarily a function of the short term change in employment, income, interest rates, taxes ; the costs of energy are (I believe) a much bigger deal for employers than employees.

Over the longer term, companies will presumably locate plants where there is ample energy and employees will follow and in that way real estate prices can be affected. But unless there are regular blackouts and/or reduction in net income/employment I would be surprised to see electricity prices affect real estate prices in a discernible way.